Mês: July

_the July│2020 edition of our Newsletter has the following highlights:

– CVM publishes Instruction reducing the minimum percentages of corporate interest required for filing lawsuits and exercise of related rights

– Publicly-held company is forced to provide list of its shareholders for purposes of the filing of a management liability lawsuit

– CVM acquits officer accused of insider trading for lack of intention to obtain undue advantage

_ CVM publishes Instruction reducing the minimum percentages of corporate interest required for filing lawsuits and exercise of related rights

On June 22, 2020, the Brazilian Securities Exchange Commission (“CVM“) published Instruction No. 627 (“ICVM 627“), which establishes a scale reducing, based on the capital stock, the minimum percentages of corporate interest required for the exercise of some of the rights set forth in Law No. 6.404 of 1976 (“Brazilian Corporation Law“).

Pursuant to the 1^st article of ICVM 627, the reduced percentages shall apply to the shareholder who wishes to exercise the following rights:

• filing of a suit to request the full presentation of the company’s books (article 105 of the Brazilian Corporation Law);
• calling of a shareholders’ meeting in case the managers fail to call it within eith days upon a justified request (paragraph “c”, sole paragraph, article 123 of the Brazilian Corporation Law);
• the request, in a shareholders meeting, for information regarding the shares and options held by the managers, the benefits and advantages paid to the managers by the company and correlated entities, the conditions of the managers and high executives’ labor agreements, as well as any material facts of the company (paragraph 1, article 157 of the Brazilian Corporation Law). );
• filing of a derivative suit against the company’s managers, i.e., when the shareholders meeting decides not to file the suit (paragraph 4, article 159 of the Brazilian Corporation Law);
• the request for information to the audit committee (Conselho Fiscal) on matters within its authority (paragraph 6, article 163 of the Brazilian Corporation Law); and
• filing of a civil liability suit against the controlling company without the provision of a guarantee (paragraph “a”, paragraph 1, article 246 of the Brazilian Corporation Law).

As of July 1^st, 2020, when ICVM 627 came into force, the percentage provided for in the aforementioned articles (i.e. 5% of the capital stock), was reduced according to the capital stock of the publicly-held company and is applicable as follows:

ICVM 627 and the report of its public hearing can be accessed at the link below, in Portuguese:

http://www.cvm.gov.br/legislacao/instrucoes/inst627.html

http://www.cvm.gov.br/export/sites/cvm/audiencias_publicas/ap_sdm/anexos/2019/sdm0719_relatorio_de_analise.pdf

_ Publicly-held company is forced to provide list of its shareholders for purposes of the filing of a management liability lawsuit

CVM’s Board has decided, in Procedure SEI 19957.010274/2019-54, in favor of the request made by minority shareholders, regarding the delivery by a publicly-held company of a list of its shareholders, with their names and number of their shares, pursuant to article 100, §1^st, of the Brazilian Corporation Law, in order to fulfill the minimum quorum for the proposal of a civil liability suit against the company’s managers.

The company had rejected the shareholders’ request stating that there was no specific reason to justify the request for information, according precedents of CVM’s Board, declaring the shareholders were not able to support the alleged right to be defended, as required pursuant to article 100, § 1^st of the Brazilian Corporation Law.

THE MEMBERS OF THE BOARD UNANIMOUSLY DECIDED TO FOLLOW THE TECHNICAL AREA’S REPORT, WHICH EXPRESSED SAID THAT THE LIST SHOULD BE PROVIDED IF THE REQUEST OF A SHAREHOLDER (I) COMPLIED WITH THE LEGAL REQUIREMENTS OF ARTICLE 100, § 1^ST, OF BRAZILIAN CORPORATION LAW, THAT IS, IF IT WAS BASED ON THE BINOMIAL “DEFENSE OF RIGHTS” AND “CLARIFICATION OF SITUATIONS”, (II) WAS AIMED AT THE DEFENSE OF A RIGHT INHERENT TO ITS CONDITION AS SHAREHOLDER AND, THEREFORE, OF INTEREST TO ALL SHAREHOLDERS; AND (III) BASED ITS REQUEST, EVEN IF BRIEFLY, IDENTIFYING THE RIGHT TO BE DEFENDED OR THE SITUATION TO BE CLARIFIED. IN THIS SENSE, IT WOULD NOT BE FOR THE COMPANY TO ANALYZE THE MERIT OF THE REQUEST MADE BY THE SHAREHOLDERS, BUT ONLY TO VERIFY THAT THE LEGAL REQUIREMENTS FOR THE PROVISION OF THE LIST OF SHAREHOLDERS HAVE BEEN MET.

The decision is in line with the precedents of CVM’s Board in recent decisions and with the guidance of SEP (Superintendência de Relações com Empresas) contained in Circular Letter/CVM/SEP/No. 2/2020, which understand that, although requests that are justified to facilitate the mobilization of shareholders in order to discuss issues related to the company and participating in shareholders’ meetings (such as the adoption of a multiple vote or separate election of members of the Board of Directors and of the audit committee (Conselho Fiscal)), do not find support in article 100, § 1^st, of the Brazilian Corporation Law, in the event that shareholders have to act together to defend any right that, due to the applicable legislation or the bylaws of the company, there is a minimum quorum to be met (such as a liability action against managers to be proposed by shareholders, such as the case examined herein, or the action for the full presentation of the company’s books), the list shall be provided.

More information can be accessed at the link below, in Portuguese:

http://www.cvm.gov.br/decisoes/2020/20200114_R1.html

_ CVM acquits officer accused of insider trading for lack of intention to obtain undue advantage

CVM’s Board unanimously acquitted, following CVM’s reporting officer, when ruling on Administrative Proceeding CVM No. 19957.005966/2016-38, an officer of a publicly held company of the accusation of insider trading, in violation to article 13 of CVM Instruction No. 358/02 (“ICVM 358“).

The officer sold part of the shares he held after receiving financial information regarding the company during the quiet period, provided in article 13, §4^th of ICVM 358. The defenses’ main argument was that the sale of shares was made to bear extraordinary personal expenses he incurred during such period, due to renovations he was carrying out on his property.

In the reporting officer’s vote, the four elements that would characterize an insider trading were: (i) existence of relevant information, not yet disclosed to the market; (ii) access to such information by the accused; (iii) use of the information when trading; and (iv) purpose to take advantage for themselves or for third parties. In addition, there is a relative presumption, against the accused, regarding the use of the relevant information with the intention to obtain an undue advantage for himself or for others, pursuant to ICVM 358, which can be dismissed if there is evidence to the contrary.

In this sense, the numerous receipts presented by the defense, which identified extraordinary expenses whose value could justify the sale of shares, were taken into consideration by the reporting officer and, considered along with the other arguments of the defense, such as the low securities volume operated and the inexpressive amount of the supposed avoided loss, caused her to create a reasonable doubt regarding the officer’s misconduct, therefore, voting for the acquittance of the accused, in accordance to the principle in dubio pro reo.

For more information on this case in Portuguese, please access the link below:

http://www.cvm.gov.br/noticias/arquivos/2020/20200616-1.html

_ the July │ 2019 edition of our Newsletter has the following highlights:

– Brazilian Securities and Exchange Commission releases new Normative Ruling regarding supervisory agreements

– Legal validity of digitally signed documents

– Brazilian Securities and Exchange Commission discloses its Sanctions Activity Report for the first quarter of 2019

_ Brazilian Securities and Exchange Commission releases new Normative Ruling regarding supervisory agreements

On June 17^th, 2019, the Brazilian Securities and Exchange Commission (“CVM”) issued Normative Ruling No. 607 (“ICVM 607”) which provides, among other matters, the procedures regarding the autarchy’s sanctioning action. ICVM 607 will be effective on September 1^st, 2019, and its main innovation is the possibility to execute administrative agreements within the scope of supervisory proceedings (“Supervisory Agreement”).

The Supervisory Agreement may be proposed to CVM by individuals or legal entities to confess a violation of legal and regulatory rules subject to CVM’s supervision for the purposes of (i) identifying other individuals or legal entities involved in such violation, when applicable; and/or (ii) obtaining information and documents that prove such violation.

The ratification of the Supervisory Agreement proposed to CVM may cause (i) the extinction of the public administration’s punitive action, in the event that the Supervisory Agreement proposal is submitted without CVM’s prior knowledge of the reported violation; or (ii) the decrease of 1/3 to 2/3 of the applicable penalties, in case CVM has prior knowledge of the reported violation.

Among the Supervisory Agreement’s innovations, we also highlight the following:

• The proposal may be submitted to CVM until the beginning of the violation judgment by its board;
• The proposal remains confidential until the Supervisory Agreement is executed.
• The analysis of the Supervisory Agreement proposal shall be made by the Supervisory Agreement’s Committee (“CAS”), and its composition and operation are subject to a specific regulation to be issued by CVM’s president.
• The rejection of a Supervisory Agreement proposal does not imply a confession regarding the matter nor recognizes the analyzed practice as illegal.
• Once the Supervisory Agreement is executed, it shall be published within 5 days, in a clear and sufficient way for the comprehension of its clauses on CVM’s web page.
• The failure to comply with the obligations assumed in the Supervisory Agreement may cause the annulment of the punishment extinction benefits, or penalties reduction mentioned above, by means of a statement issued by CAS or CVM’s board.

ICVM 607 can be accessed in Portuguese at:

http://www.cvm.gov.br/legislacao/instrucoes/inst607.html

_ Legal validity of digitally signed documents

The pursuit to sign agreements digitally has been frequently requested by the parties involved, but there are still many doubts regarding its legal validity and formalization.

Articles 104 and 107 of the Brazilian Civil Code of 2002 provide that the legal transaction and the declaration of will are not necessarily subject to the form determined by law, except when a special form is not expressly forbidden or stated. Thus, if the digital signature is not forbidden in the applicable regulation, it is possible to use it for the purposes of the validity of legal transactions.

On August 24^th, 2001 the Provisional Measure No. 2.200-2 (“MP”) was issued, whereby the Brazilian Public Key Infrastructure – ICP-Brazil (Infra-Estrutura de Chaves Públicas Brasileira) was created to ensure the authenticity, integrity and legal validity of digital documents, supporting applications and applications that use digital certificates, as well as the performance of secure electronic transactions.

In accordance to article 10, paragraph 1, of the MP, the information provided by documents that were digitally signed by its signatories through the certification procedure provided by ICP-Brazil, shall be presumed to be true.

In addition, the validity of digitally signed agreements has already been recognized by Brazilian judicial courts. In 2018, the Brazilian Superior Court of Justice (“STJ”) decided, within the scope of Special Appeal No. 1.495.920 – DF (2014/0295300-9) regarding the execution of extrajudicial enforcement of an electronic loan agreement, which was signed through digital certificate technology, in compliance with the certification procedure provided by ICP-Brazil, without the signature of witnesses.

The reporting judge, justice Paulo de Tarso Sanseverino, understood that the need for two (2) witnesses to sign this type of agreement, in order for it to be considered an execution instrument, would hinder its execution. In addition, since digitally signed agreements are subject to the electronic certification authenticity, duly checked by ICP-Brazil, the reporting judge understood that the witnesses’ signatures were unnecessary.

Finally, considering legal and case law recognition regarding this matter, individuals and legal entities tend to use digital signing to formalize agreements more frequently, due to the facility and promptness involved in this procedure, nevertheless, the use of specialized platforms is always recommended for this purpose.

Additional information regarding the MP and Special Appeal No. 1.495.920 – DF (2014/0295300-9) can be accessed in Portuguese at:

http://www.planalto.gov.br/ccivil_03/MPV/Antigas_2001/2200-2.htm

http://www.stj.jus.br/sites/STJ/default/pt_BR/Comunica%C3%A7%C3%A3o/noticias/Not%C3%ADcias/Contrato-eletr%C3%B4nico-com-assinatura-digital,-mesmo-sem-testemunhas,-%C3%A9-t%C3%ADtulo-executivo

_ Brazilian Securities and Exchange Commission discloses its Sanctions Activity Report for the first quarter of 2019

On May 30^th, 2019, the CVM disclosed its Sanctions Activity Report for the first quarter of 2019, which consolidates the information regarding CVM’s punitive action (“Report”).

Article 9, items V and VI of Law No. 6.385/76 provides that CVM is responsible for assessing, mainly upon administrative proceeding, illegal acts and unfair practices of directors and officers, members of the audit committee of publicly-held companies, shareholders of publicly-held companies, intermediaries and other market participants.

Among the punitive information regarding the first quarter of 2019, we highlight the following:

• Punitive and investigative procedures: CVM initiated 20 investigative administrative proceedings. 29 administrative proceedings were completed by the technical areas with some kind of prosecution.
• Commitment Agreements: 17 proceedings regarding Commitment Agreements’ proposals were assessed, involving R$14,67 million, from which 13 were approved by CVM’s Board, amounting to the sum of R$14,11 million.
• Fines: CVM’s board decided 18 administrative proceedings, which penalized 32 defendants upon the payment of fines, amounting to the sum of R$183,3 million. The total amount of the fines increased approximately three times in comparison to the same period in 2018, even though the number of penalized defendants in the same period has decreased by half.

Additional information regarding the Report can be accessed in Portuguese at:

http://www.cvm.gov.br/export/sites/cvm/publicacao/relatorio_atividade_sancionadora
/anexos/2019/20190530_relatorio_atividade_sacionadora_1o_trimestre_2019.pdf